Stocks Climb on Strength in Technology Shares

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.52%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.10%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.97%.

U.S. stock index futures this morning are moderately higher. A rally in technology stocks is supporting gains in the broader market, with Netflix up more than +6% and Alphabet up more than +3%.  However, gains in stock indexes are limited after hawkish central bank comments pushed global bond yields higher.

Positive corporate news today is supporting stocks, with Netflix up more than +6% after reporting a larger-than-expected increase in paid streaming customers.  Also, Alphabet is up more than +3% after saying it plans to cut around 12,000 jobs or more than 6% of its global workforce.  In addition, SVB Financial Services is up more than +14% after reporting better-than-expected Q4 net interest income,

On the negative side for stocks, Nordstrom is down more than -1% after reporting weak holiday sales and cutting its full-year EPS forecast. Also, Eli Lilly is down more than -1% after it failed to get early approval from the FDA for its Alzheimer’s treatment donanemab.

Another negative for stocks is higher global bond yields.  The 10-year T-note yield this morning is up +8.0 bp at 3.471%.  Also, the 10-year German bund yield is up +7.8 bp at 2.143% after ECB President Lagarde said the ECB would stay the course in raising interest rates even as inflation has weakened.

Today’s U.S. economic news showed Dec existing home sales fell -1.5% m/m to a 12-year low of 4.02 million, a smaller decline than expectations of 3.95 million.

Stocks are being undercut by concern that higher interest rates are already starting to impact the economy and corporate profitability. Of the 55 S&P 500 companies that have reported quarterly earnings results thus far, only 66% have beaten analyst estimates, compared with the 80% average seen over the past several quarters.

Overseas markets are higher.  The Euro Stoxx 50 index is up +0.48%.  The Shanghai Composite Stock index today closed +0.76%, and Japan’s Nikkei Stock index closed up +0.56%.

Today’s stock movers…

SVB Financial Services (SIVB) is up more than +14% to lead gainers in the S&P 500 after reporting Q4 net interest income of $1.05 billion, stronger than the consensus of $1.02 billion and forecast Q1 net interest income of between $925 million and $955 million, above expectations. 

Netflix (NFLX) is up more than +6% to lead gainers in the Nasdaq 100 after reporting 230.75 million streaming paid memberships in Q4, above the consensus of 227.3 million. 

PPG Industries (PPG) is up more than +5% after reporting Q4 net sales of $4.19 billion, stronger than the consensus of $4.13 billion. 

Alphabet (GOOGL) is up more than +3% after the company said it plans to cut around 12,000 jobs or more than 6% of its global workforce.

Regions Financial (RF) is up more than +3% after reporting Q4 net interest income of $1.41 billion, above the consensus of $1.37 billion.

Capital One Financial (COF) is up more than +3% after it announced it eliminated more than 1,100 jobs. 

American Tower (AMT) is down more than -3% to lead losers in the S&P 500 on a report from a Spanish news website that said the company is planning on submitting a bid to purchase Cellnex Telecom.

Nordstrom (JWN) is down more than -1% after reporting net sales fell -3.5% y/y in the nine weeks ended Dec 31 and lowering its full-year adjusted EPS forecast to $1.50-$1.70 from a prior forecast of $2.30 to $2.60, well below the consensus of $2.39.

Eli Lilly (LLY) is down more than -1% after it failed to get early approval from the FDA for its Alzheimer’s treatment donanemab.

AstraZeneca (AZN) is down more than -1% after Stifel cut its price target on the stock by more than 3%, citing a dropoff in sales for Covid vaccines.

Across the markets…

March 10-year T-notes (ZNH23) today are down -17 ticks, and the 10-year T-note yield is up +8.0 bp at 3.471%.  Hawkish comments today from ECB President Lagarde undercut German bund prices and are weighing on T-notes.  The 10-year German bund yield is up +8.9 bp at 2.154% after Lagarde said the ECB should stay the course on hiking interest rates even as price pressures have slowed.  Also undercutting T-note prices is an increase in inflation expectations after the 10-year breakeven inflation rate today climbed to a 2-week high of 2.524%.

The dollar index (DXY00) today is up by +0.46%.  The dollar is climbing today on the back of higher T-note yields. Also, the yen is sharply lower against the dollar after BOJ Governor Kuroda said the BOJ would continue with monetary easing. 

EUR/USD (^EURUSD) today gave up an early advance and is down by -0.18%. A stronger dollar today has fueled long liquidation pressures in EUR/USD.  The euro initially moved higher in overnight trade after German Dec PPI rose more than expected and after ECB President Lagarde said the ECB should “stay the course” on raising interest rates, pushing back against a report earlier this week that said the ECB is considering a slower pace of interest rate hikes. 

German Dec PPI eased to 21.6% y/y from 28.2% y/y in Nov, stronger than expectations of +20.7% y/y.

ECB President Lagarde said, "stay on course is her mantra for monetary-policy purposes," even as the spike in prices appears to have peaked.  Her comments suggest she is against slowing the pace of ECB interest rate hikes.

USD/JPY (^USDJPY) today is up by +1.39%.  The yen is sharply lower today on comments from BOJ Governor Kuroda, who pushed back on speculation the BOJ would soon end its ultra-easy monetary policy when he said the BOJ "will continue" its expansionary policy.  The yen tumbled today even after Japanese economic news showed inflation pressures accelerating. 

Japan's Dec national CPI ex-fresh food rose +4.0% y/y, right on expectations and the largest increase in 41 years.  Also, the Japan Dec national CPI ex-fresh food and energy rose +3.0% y/y, the largest increase in 31 years but below expectations of +3.1% y/y.

February gold (GCG3) this morning is up +2.0 (+0.10%), and March silver (SIH23) is up +0.020 (+0.08%).  Precious metals prices this morning are slightly higher, with gold prices climbing to a 9-month high.  Increased demand for precious metals as a hedge against inflation gave prices a boost after the 10-year breakeven inflation rate today climbed to a 2-week high. Gains in metals are limited by a stronger dollar and higher global bond yields. 

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